What is Strategic Procurement in Fleet?
Procurement practices, akin to all corporate processes, are dynamic and adjust gradually to new realities. In the Fleet category, however, significant changes within the ecosystem have accelerated adjustments.
The identity of the fleet procurement specialist is shifting towards a more strategic person, supporting not only immediate needs (typically vehicles and fuel), but anticipating new requirements. In short, proactive procurement is the new normal.
Fleet ecosystem changes and their impact
- Connectivity - from optional to default: vehicle connectivity is becoming a reality as cars leave the factory with connected features. The impact of connectivity goes beyond data privacy regulations, but it also offers alternatives to compliance, such as recording utilization of vehicles, safety and sustainability.
- Consolidation of vendors: OEMs and leasing providers are continuing to merge and acquire, but beyond doing so (and between competing businesses), the traditional supply chain is venturing into adjacent business lines. The bigger players are acquiring equity in start-ups and scale-ups that focus on technology and innovation to de-risk internal development and activate new services
Impactful corporate changes
- Centralisation of procurement/fleet management: accelerated during (and post) pandemic, the need for oversight and centralisation has led to the absence of local function.
- Generational impact: from Gen-Z to boomers, the average company counts multiple generational identities amongst its employees. Each of these has different expectations from employers, who need to cater for more flexibility, e.g., younger employees prefer social interaction (at the office) and are less motivated by company cars, whereas baby-boomers love to work from home, but consider their company car as an important benefit.
Impactful global changes
- Inflation: globally, an inflation peak is expected in 2022 (7.9%, according to Euromonitor International). Russia’s invasion of Ukraine has resulted in price surges. In addition, most large economies are facing a shortage of workers, which will drive wages up. Finally, extreme weather conditions threaten agricultural yields and food security.
- Delivery dates, raw materials, supply chain, energy prices: most goods encounter delivery delays and price hikes and a positive outlook is not yet on the agenda.
These are just a few elements procurement specialists need to understand to do their jobs well. Each of the trends have an impact on either their company’s position or the status of the supply chain. Holding each sourcing project against the impact of ecosystem, corporate and global changes is a firm recommendation.
This also relates to procurement’s place in the corporate organisation. The procurement function can act as a finger on the pulse of the fleet and mobility supply chain. Availability of vehicles and price surges are not the only indicators, so too is the global market’s reduced appetite to invest, which will have an impact on the start-ups and scale-ups corporate fleet managers rely on to deliver innovation.
Finally, procurement’s focus on savings is at risk. Cost is rising and can no longer be compensated by multi-bidding, discount agreements or other typical techniques. In addition, the supply chain is consolidating further and price decreases are not expected anytime soon.
Therefore, procurement needs to look for opportunities outside of the old handbook, such as operational savings, digitisation and centralisation tools. Companies that look at these as “additional expenditures” rather than actual requirements, might fall behind and pay a hefty price in a near future.